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Debt Settlement companies attempt to resolve your debt problems by negotiating the amount of money you owe to your creditor – usually 40% to 60% of your debt. In contrast a Credit Counseling (or Debt Management Organization) such as Debt Free Christian will not try to re-negotiate what you owe, but will seek to lower your interest rate and often times lower your payments. Then by automating your payments and “snow-balling” your debt, all due amounts are eventually paid off.
Debt Settlement is less expensive – but, you are not paying your debt. Not meeting this type of financial obligation flies in the face of Christian principles and most believers have a hard time reconciling this approach with their faith. But, there are other concerns…

1. Your Credit Will Suffer
   Key factors that damage your credit score are a history of late or missed payments, charge-offs, and court judgments filed against you and bankruptcies. Debt Settlement companies will ask you to stop paying on your debts and save up those funds in order to create a lump sum to settle you debts at a later time. This sometimes takes years and may or may not take longer than Credit Counseling – it all depends on the situation. Obviously, this will have a devastating effect on your credit score.

In contrast, Credit Counseling will not directly affect your credit score, (according to Fair Isaac & Company, the organization that created the FICO credit score). The fact that you are enrolled in Credit Counseling is sometimes noted on your credit report and some creditors see this as a positive – you are proactive in resolving your debt. Other creditors can interpret this as a negative and you may need to shop around a little if you are looking for a loan while you are in a Credit Counseling program (we prefer that you don’t). When you complete your program any notation should be removed from your credit report. Generally speaking, you will save money and retire your debt years sooner. This makes Credit Counseling a valuable option for many.

Many argue that if you want to get out of debt and stay out of debt then your credit score really doesn’t matter. Regardless of your position, your FICO score will go up with consistent, on time payments, along with several key other factors. If you would like more help with raising your FICO score, please give us a call and we can assist you with this.

2. You Could Get Sued
   Collection calls must stop once you file for bankruptcy, but not so with Debt Settlement. Your creditors will continue to call you and try to collect the debt while you are attempting to settle. This requires a very strong constitution. You need to be honest with yourself. Are you are up for this kind of stress?

   If in the worst case scenario you are sued for the money you owe, you may need to pay your debt in full to clear up your credit report (makes sense!). The Debt Settlement companies will drop you if a law suit if filed.  Citibank, according to some, seems to be one of the more aggressive creditors. Companies like this may be very difficult to settle with. Credit Counseling or bankruptcies are probably better options.

3. Taxes You Must Pay
   Any balance over $600 is taxable! If your tax rate is 15%, $10,000 of forgiven debt is $1500. The IRS will not forgive this debt. This reality needs to be factored into the overall equation before you pull the trigger on a settlement program.
4. Illegal service in 12 States
   Note that 12 States prohibits Debt Settlement companies from operating in their state – even if the company is based in another state. If they do it anyway - beware! The States are: Arizona, Georgia, Hawaii, Louisiana, Maine, Mississippi, New Jersey, New Mexico, New York, North Dakota, West Virginia and Wyoming.

If you need help with eliminating your debt or other financial matters, feel free to give us a call and speak with our friendly and professionally trained financial counselors. (800) 624-9747 Call today!

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We do, however, speak a message of wisdom among the mature, but not the wisdom of this age or of the rulers of this age, who are coming to nothing. 7 No, we speak of God's secret wisdom, a wisdom that has been hidden and that God destined for our glory before time began.
I Corinthians 2:6

 

It is written: "I believed; therefore I have spoken." With that same spirit of faith we also believe and therefore speak
II Corinthians 4:13

 

On the contrary, we speak as men approved by God to be entrusted with the gospel. We are not trying to please men but God, who tests our hearts.
I Thessalonians 2:4

 

Jonathan, David's uncle, was a counselor, a man of insight and a scribe.
I Chronicles 27:32

 

Ahithophel was the king's (David's) counselor.
I Chronicles 27:33

 

"To God belong wisdom and power; counsel and understanding are his.
Job 12:13

 

And I will ask the Father, and he will give you another Counselor to be with you forever - the Spirit of truth.
John 14:16-17